MEDICINE owes much to untrained minds, or at least to minds untrained
in medicine. Even Pasteur, though a trained scientist, was not a doctor;
and the laryngoscope was perfected - some say actually invented - by a
great singing master, one Manuel Garcia, of Spain.
Silvio Gesell, who died recently, was a German business man and quasi-economist.
He lived in Argentina and wrote some of his many papers in the Spanish
language. In 1890 while in Argentina, he proposed essentially that particular
substitute for money which now bids fair to sweep this country, under the
name of "Stamp Scrip."
Gesell, before he died, accumulated a considerable following abroad;
but it took the tortures of a depression to bring about any practical efforts
to make use of his Stamp Scrip idea. (1)
In 1919 there began in Germany the so-called Freiwirtschaft movement
which contemplated a complete currency of Stamp Scrip. In the course of
this movement, one Hans Timm, a friend of Gesell's, formed an exchange
for the purpose of putting the principle into operation. To his Scrip he
gave the name of "Wära", (a word compounded of two others, "Ware" and "Währung,"
which mean respectively "Goods" and "Currency"); and to his organization
he gave the name of "Wära Exchange Association." The Scrip was to be issued
in denominations of 1/2, 1, 2 and 5 Wara, and to be purchasable of the
association for 1/2, 1, 2, and 5 Reichsmark respectively. But the word
Reichsmark nowhere appeared, and the scrip, though a private enterprise,
was intended to be permanent. Only in case of some untoward emergency was
it to be redeemed; and in view of that possibility, the purchase money
was kept on hand as a provisional redemption fund. Naturally, the motive
of a purchaser would be primarily unselfish and civic, and only secondarily
selfish, in the belief that every helper of the public must share in any
public betterment that might result.
A certain modest amount of Wara crept into the German circulation,
and spread itself more or less over the entire land.
Though not intended to be redeemed, the scrip bore stamps, not at the
rate of 2 per cent attachable weekly, but at the rate of 1 per cent attachable
monthly. These stamps (sold by Herr Timm's organization) were intended
to speed the circulation, but the proceeds, instead of redeeming the scrip,
were to be used in the propagation of the scrip idea.

SCHWANENKIRCHEN

Not till 1931 was any general notice aroused by Wara. Then the owner
of a Bavarian coal mine tried an experiment with it which gradually caught
the public imagination. For two years the mine had been closed; and the
owner, Herr Hebecker, conceived the idea that he might open it and pay
his employees with Wära. He would have to buy the Wära (besides negotiating
a loan) and he would have to pay for the Wära with Reichsmarks, but the
Reichsmarks were not circulating and the Wära, he believed, would circulate.
Moreover, there was already a thin layer of Wära loose in Germany, and
Herr Hebecker hoped to win the patronage of those who used it. In part,
he was a fellow propagandist with those users, and Herr Timm issued bulletins
among them.
Hebecker's employees lived in Schwanenkirchen, a village of only 500
inhabitants. For over two years this village had barely existed by means
of the dole. Everybody was in debt; nor could anybody see the slightest
hope of the mine being reopened; for (says Mr. Cohrssen, writing in the
"New Republic")(2) "deflation raged all through Germany, leaving bankruptcies,
suicides and overcrowded jails in its wake. Herr Hebecker assembled his
workers. He told them that he had succeeded in getting a loan of 40,000
Reichsmark, that he wished to resume operations but that he wanted to pay
wages not in marks but in Wara. The miners agreed to the proposal when
they learned that the village stores would accept Wara in exchange for
goods.
"When, after two years of complete stagnation, the workers for the
first time brought home their pay envelopes, no one was interested in hoarding
a cent of it, all the money went to the stores to pay off debts or for
the purchase of necessities. The shopkeepers, too, were happy. Although
at first they had felt a little hesitant about Wara, they had no choice,
as no one had any other kind of money. The shopkeepers then forced it on
the wholesalers; the wholesalers forced it on the manufacturers, who in
turn tried to pass it on to those who carried their notes, or they exchanged
it at Herr Hebecker's mine for coal. No one who received Wara wished to
hold it, the workers, storekeepers, whole salers and manufacturers all
strove to get rid of it as quickly as possible, for any person who held
it was obliged to pay the tax. So Wara kept on circulating, a large part
of it returning to the coal mine, where it provided work, profits and better
conditions for the entire community. Indeed, one could not have recognized
Schwanenkirchen a few months after work had been resumed at the mine. The
village was on a prosperity basis, workers and merchants were free from
debts and a new spirit of freedom and life pervaded the town.
"The news of the town's prosperity in the midst of depression-ridden
Germany spread quickly. From all over the country reporters came to see
and write about the 'Miracle of Schwanenkirchen.' Even in the United States
one read about it in the financial sections of most big papers.
But no explanation was given as to the real cause of the miracle -
that a non-hoardable money was being tried out and that it was working
marvelously. Had Herr Hebecker used 40,000 Reichsmark instead of Wara,
his efforts would have inevitably resulted in failure; the money would
have circulated through only one or two hands, each person retaining as
much as possible and hoarding it because of the hard times. And after a
short while Herr Hebecker would have joined the defeated ranks of those
thousands who had failed in their struggle with the depression.
"To complete the story about Wara it must be added that subsequently
it was accepted in a few thousand stores throughout Germany, and that one
or two more entire communities recuperated under the Wara treatment. A
few small banks even opened Wara accounts, accepting the deposits and at
once lending the Wara out to those who asked for credit. Of course these
banks were under the same compulsion of circulating Wara to avoid the one
per cent monthly tax, and it was obvious that the depositor was only too
glad to have the par value of his deposit preserved without interest.
"The Wara movement had an important influence in Germany. It counteracted
the deflationary policy of the government. Numbers of people found employment
and in some places prices rose. Wara worked for those who believed in it."
But now the German Government interfered on the theory that Wara was
money and therefore an illegal usurpation of a Government prerogative.
The question was taken to the courts and Wara won. But the Government continued
its opposition alleging that Wara might turn into harmful inflation. With
war inflation still fresh in memory, the government was apparently unable
to see the difference between the kind of inflation which begins at the
level of the ground and aims at the sky, and the modest Wara which began
at the bottom of the pit and aimed back at the threshold - without ever
getting within shouting distance of it. Under a misconception, therefore,
- one of the most common of monetary misconceptions, - the German government
imagined that it could detect in Wara the threat of evil - evil to come
out of good; and at last the government succeeded in stopping the good.
It forbade Wara by means of an emergency law (3) "As a result," (writes
Mr. Cohrssen), "Schwanenkirchen and other towns where Wära have provided
the life blood of economic activity are on the dole again."
As to the spread of Wära through Germany, not more than 20,000 Wära
circulated at any one time. Yet it was said, during 1930-31, that 2 1/2
millions of people handled it. Accordingly, many observers believed that
the amount issued was far greater than it was.
So much for Schwanenkirchen and Wara.

WOERGL

Compared with the Bavarian village of Schwanenkirchen, the Austrian
town of Woergl is a large community. It has about 4300 inhabitants of whom,
however, 1500, in 1931 - 32, had lost their jobs; for, in and about Woergl
a number of factories had closed their doors. Taxes, therefore, were in
arrears, and the town itself was almost as "down-and-out" as these 1500
of its inhabitants.
The Mayor of Woergl, (Unterguggenberger by name) organized a Local
Relief Committee, not so much to give charity as to produce jobs.
But who or what was to produce the good Austrian Schillings that would
pay for the jobs? This mayor with long name was not disposed to help anybody
at anybody's expense. In fact, he was shrewdly and very properly resolved
that the town should be one of the beneficiaries of anything that was done.
In the first place, out of the new jobs, the town would get new roads and
other municipal improvements and repairs long overdue. In the second place,
by getting money into the pockets of the workers, it might well hope to
recover from those pockets some of the back taxes. But to pay wages in
order to recover a part of the wages would hardly be profitable; nor would
the imposition of new taxes for the sake of wages for the sake of old taxes
be a very good swap.
Herr Unterguggenberger had watched the Schwanenkirchen Wara experiment
with intense interest. The solution of the Woergl situation pointed to
Stamp Scrip. The town would issue it, with the consent of the workmen and
of a sufficient number of the merchants and also of the local savings bank.
The bank was to hold the guarantee fund (in the form as previously described
of a bookkeeping transaction). There was to be no final redemption; and
the stamps, at 1 per cent per month, were to be sold by the town, and the
proceeds used, not for propagating the idea but for the enlargement of
the town's welfare work. But though there was to be no final and complete
redemption, every holder of the scrip was to have the privilege of redeeming
it at the town treasury or at the local banks at any time; but for such
redemption a service: charge of two per cent had to be paid. As the stamp
was only 1 per cent, the disadvantages of redemption at 2 per cent were,
at any given moment, greater than the probable disadvantages of going on
at 1 per cent. Redemption, therefore, was not likely to hurt the circulation
of the scrip. Moreover the banks and the town were to re-issue any that
was redeemed.
And so it worked out in practice.
All city employees, including the mayor, were to receive 50 per cent
of their salaries in scrip, and the new emergency workmen, were to be paid
100 per cent in that form.
According to plan, on August 1, 1932, 32,000 Schillings' worth of the
scrip (equivalent to about $4500) was issued, in denominations of 1, 5
and 10 Schillings. This amount was later found to be in excess of the actual
need, and instead of following an "inflationary" policy, only about l/3
of the issue or less was kept in circulation through re-issues, the rest
remained with the city. This showed great wisdom on the part of the municipal
administration, as it kept the purchasing power of scrip at par with regular
Schillings.
The scrip was called "Woergl Certified Compensation Bills." The monthly
stamps (affixed to the face of the scrip) were named "Relief Contribution
Stamps," and each unit of scrip was super-scribed, "They Alleviate Want,
Give Work and Bread."(4)
What were the results?
For the following information I am indebted to a Geneva economist,
Hermann Scheibler,(5) who went to Woergl on my behalf and questioned the
mayor and the bank and some of the merchants and workmen.
Soiree of the local merchants, like some of those in Schwanenkirchen,
had begun by refusing to accept what they regarded as a bizarre substitute
for real money; but seeing it circulate and seeing the city employees patronizing
the merchants who took it and banked it, the skeptics forced by considerations
of competition once more decided to "climb on the band wagon." Soon everybody
accepted it without hesitation, because everybody else accepted it. The
only cases of permanent refusal to receive the scrip are the post office
and the railroad, both of which are government institutions with interests
primarily outside of the vicinity where the scrip is supposed to circulate.
The attitude of the Austrian Government has not been hostile.
As to the rate of turnover, the mayor reports that the amount of the
first wages paid has returned to the city 20 times a month.
The other facts are contained in a report which the mayor of Woergl
made to the Tyrol state government, January 1, 1933
Taxes had been in arrears from 1926 to 1931 as follows (year by year):

21,000 Schillings
26,000 "
28,000 "
31,000 "
61,000 "
118,000 "

But after the scrip was issued, not only were current taxes paid (as
well as other debts owing the town), but many arrears of taxes were also
collected. During the first month alone,(6) 4542 Schillings were thus received
on the arrears. Accordingly, the city not only met its own obligations
but, in the second half of 1932, executed new public works to the value
of 100,000 Schillings. Seven streets aggregating 4 miles were rebuilt and
asphalted; twelve roads were improved; the sewer system was extended over
two more streets; trees were planted and forests improved, and permanent
jobs were given to from 30 to 50 of the 1500 unemployed; but probably a
powerful influence has been exerted to prevent any increase of unemployment,
by keeping business active.
In these benefits, the local banks shared. Up to the date when the
scrip was issued (August 1, 1932) withdrawals at the local Reifeisen Bank
had exceeded deposits for an entire year; in the first and last months
of the said year, the excesses of withdrawals over deposits were: August
1931, 44,362 Schillings; July 1932, 12,355 Schillings. But in August 1932,
the first month of the Stamp Scrip, the balance turned the other way by
6591 Schillings, notwithstanding the fact that August is generally considered
the poorest month of the year. (7)
On January 1, 1933 Woergl (which is an Alpine town) had under construction
a new ski jump and a water basin for the Fire Department. The mayor says
that the scrip has fulfilled all promises, and thinks it should be adopted
nationally. At all events, a neighboring city of 20,000 inhabitants, was,
at last reports, considering the introduction of scrip within its borders,
under the advice of the mayor of Woergl and of a University Professor of
economics, and the Woergl experiment has begun to attract somewhat general
attention in Austria. As conclusion to this report Mayor Unterguggenberger
stated: "The Stamp Scrip of Woergl will have historic significance, because
it has kept its promise to provide 'work and bread.' It has, in fact fully
satisfied all our expectations."
We now move to the United States.

(1) There is much in Gesell's philosophy to which, as an economist,
I cannot subscribe, especially his theory of interest; but Stamp Scrip,
I believe, can, in the present emergency, be made at least as useful an
invention as Manuel Garcia's laryngoscope.
(2) See "Wara" in "New Republic", August 10, 1932.
(3) November, 1931.
(4) The stamps are affixed to the face of the scrip. On the reverse
side the following is printed:

TO ALL
"Slowly circulating money has thrown the world into an unheard-of crisis,
and millions of working people are in terrible need. From the economic
viewpoint. the decline of the world has begun with horrible consequences
for all. Only a clear recognition of these facts, and decisive action can
stop the breakdown of the economic machine, and save mankind from another
war, confusion and dissolution.
"Men live from the exchange of what they can do. Through slow money
circulation this exchange has been crippled to a large extent, and thus
millions of men who are willing to work have lost their right to live in
our economic system. The exchange of what we can do must, therefore, be
again improved and the right to live be regained for all those who hasve
already been cast out. This purpose, the "Certified Compensation Bills
of Woergl," shall serve.
"They alleviate want, give work and bread."

(5) Head of the European branch of my Index Number Service.
(6) August 10 - September 10, 1932.
(7) See also an article in the "New Outlook," for March 1933, by Mr.
Hans R. L. Cohrssen.